Secrecy drives up cost of economic development

STATE OFFICIALS always have insisted that they have to do economic development deals in secret, lest they scare off would-be investors and hurt our chances against other states. In fact, it’s only in recent years that we’ve been able to pry loose details of how much we’ve spent luring companies to our state after we’ve closed the deals.

But Caterpillar challenged that thinking last month when it picked Winston-Salem, N.C., over Spartanburg and Montgomery, Ala., to build a new heavy-equipment plant. Unlike South Carolina and Alabama, North Carolina has a law that requires incentive offers to be made public, in real time. That means everyone knew before the deal was sealed that N.C. officials were offering a package worth up to $73 million.

Bob Orr, a former N.C. Supreme Court justice and current director of the N.C. Institute for Constitutional Law, told The Greenville News that huge corporations don’t make decisions based on incentives — but that they do use bidding wars between states to drive up the price of those incentives.

It’s true that transparency has the potential to drive the price up even more, but secrecy makes it a sure thing. Mr. Orr cited Dell Computer, which North Carolina offered a $300 million incentive package, only to find that other states had offered far, far less. It’s not hard to imagine how much less states might be able to spend to essentially buy economic development if businesses were not able to use this secrecy to their advantage.

The fact is that incentive packages are for losers — for states that can’t compete on their own merits. The best way to attract businesses to move to our state and, more importantly, to entice businesses already here to expand, is to offer them a skilled workforce and stable and predictable tax, legal and governmental climates and a good quality of life.

Unfortunately, we’re a long way from being competitive, which is one reason we have one of the highest unemployment rates in the nation, so we’ll probably have to keep offering incentives to make up for our shortcomings. But we need to do as much as we reasonably can to make our offers public. It is, after all, the taxpayers who are paying for these incentives.

Maybe we ultimately will decide that we are just at too much of a deficit to risk that tiny bit of alienation that might come from taking away businesses’ ability to exploit states’ penchant for secrecy, but that’s a decision we need to come to with our eyes open. And one way to do that is to watch what happens in other states that aren’t afraid of a little sunshine. At least in this case, what happened was that the state doing business in the open won out over the ones that were doing it in secret.